Manufacturers in China's inland provinces are now competing with factories in the coastal areas for workers. Not only are they targeting the same group of migrants, they are offering similar wage levels as well.

The labor shortage is not a new challenge for China's export manufacturing industry. The current deficit, however, is said to be more severe than in past years. In fact, one month after the annual spring festival, more than 90 percent of factories are estimated to still be 10 to 30 percent short of workers. This deficit is 3 percent higher than in 2010.

Unlike in previous years, factories in the southern and eastern provinces now have to compete with those in the central and western regions for workers. Even Sichuan province, which traditionally has been where most migrant workers come from, is experiencing a shortage in labor, whether skilled or not.

Wages remain the key point of contention. Workers think living costs are climbing much faster than minimum wage levels, particularly in Shenzhen in Guangdong province, Hangzhou and Wenzhou in Zhejiang province, Beijing and Shanghai. Frequent and large rises in food prices, rent and other daily necessities almost cancel out whatever salary increases workers may have received.

Unfortunately for factories along the eastern coast, manufacturers in the inland areas have been raising wages as well, to the point that salaries are now nearly on a par with those offered at traditional hubs. The cost of living in the interior region, however, is just one-third that in the southern and eastern provinces. Because of this, more migrant workers now prefer to find jobs near their hometowns rather than head to factories along the coast.

Small factories have actually been mushrooming in the inland provinces, particularly in the urban-rural integration areas. These plants typically hire workers in nearby villages, offering monthly salaries that range from 1,000 to 1,500 yuan ($152 to $228). Free accommodation is provided by some factories as well.

As of February 2011, most manufacturers in the Nanchang Industrial Park and the Hengfang Laobing Industrial Park in Bao'an, Shenzhen, are offering basic monthly wages of 1,100 to 1,500 yuan. In fact, small and midsize consumer electronic factories in the area offer 1,200 yuan ($182) monthly, on average.

While Shenzhen's city administrators raised the minimum wage to 1,320 yuan ($200) per month beginning March 1, this base salary is still within the range being offered by factories inland. In addition, one of the female workers at the Nanchang Industrial Park said that although it seems wages are rising, their workload and overtime hours have also been increasing.

Foxconn squeezing labor pool dry

It has now become normal for large, labor-intensive factories in Guangdong and Zhejiang to be 600 to 2,000 workers short after the annual spring festival. The Shenzhen Human Resources and Society Security Bureau pegs the city's labor shortage after the holiday at about 200,000 hands. Dongguan and Foshan in Guangdong, and Yiwu and Wenzhou in Zhejiang have a similar deficit.

Many such plants find their production capability slashed by half during this period. Recruitment booths have been set up at bus and train stations, and at select locations in the interior, but no more than 30 people register daily. Among those that have gone this route are Foshan's major home appliance makers Galanz and Hisense Kelon. Foxconn is being blamed for the slow stream of applicants, as it is said to have already recruited workers at the Chengdu train station during the spring festival.

At Foxconn, new hires reportedly are given at least 1,550 yuan ($236) in wages and can take home 2,100 to 2,800 yuan ($319 to $426) per month. Workers that pass the three-month evaluation period receive a salary increase, with basic pay set at no lower than 2,000 yuan ($304) and combined earnings at 2,700 to 3,600 yuan ($411 to $547) monthly. Uniforms and laundry services are provided for free. Workers also receive bonuses during the peak season and major festivals, public housing funds, and endowment, medical, unemployment, employment injury and maternity insurance. Moreover, each employee is said to be given opportunities for further training and development.

To entice applicants, factories in the coastal provinces now post job advertisements indicating total work days and hours and overtime pay. Most companies said they implement eight-hour work days with three or four hours of overtime, and 22 to 26 such days in a month. Overtime pay normally is 6 to 8 yuan ($0.91 to $1.22) per hour on weekdays, and 8 to 10 yuan ($1.22 to $1.52) per hour on weekends. Nearly all makers claim they offer a 50 to 100 yuan ($7.60 to $15.21) monthly bonus to workers that have perfect attendance. A few also provide longevity awards that come with 50 and 150 yuan ($15.21 and $22.81) cash grants for workers that have been with the factory for six months and two years, respectively.

Lodging is available, but food is not free and workers often have to share a room with six or seven other people. Some dormitories within the factory complex also charge for water and electricity usage. Very few have water heaters in the bathroom, washing machines, individual closets and air-conditioned rooms.

Given these conditions, a typical worker in Bao'an can earn between 2,200 and 2,600 yuan ($335 to $395) per month. Skilled hands and those assigned to more difficult jobs can take home more than 3,000 yuan ($456) monthly. But those living inside industrial parks receive no more than 2,000 yuan ($304) each month.

To cope with the shortage, some electronics factories in the industrial park contract help from small business owners that operate shops nearby. The owner of a small apparel store near the Nanchang Industrial Park, for instance, helps insert electronic components into circuit boards when business is slow. She receives 1.30 yuan ($0.20) for every finished circuit board.

All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.

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